Private lending LLC denied banking accounts - options?

Question

Hi all - I’m starting up a lending business, all was going fairly well until I was told by all the banks in my area that they “are unable to establish a bank account for anything that is financially related.”  Have also been told that anything related to lending money is a no-go for opening an account due to “risk.”

I’m self funded, not asking for a loan just a simple bank account for operating. Obviously in order to operate I need to have access to the banking system.

I’m looking at other banking options … various online banks etc, but does anyone have any advice or recommendations here? I’m assuming other lenders already have this figured out?

Thanks!

Erik Estrada · Answer

Hey Tim,

This very weird to me. I have a regular chase business banking account and have never had an issue with the type of business I do.

Are you lending the money yourself? Or are you brokering the loans?

Joseph Coleman · Answer

This is more of a legal and accounting question. These resources could be helpful, https://aaplonline.com/https://geracilawfirm.com/https://store.biggerpockets.com/products/lend-to-live

Jay Hinrichs · Answer

you need a community business bank.. I have never been turned down to open accounts for our private lending business so more than 5 banks in multiple states but all were commuinty business banks we have used.. Never tried a large national one though.. but they do adhere to the Patriot act and such.

Tim Daniels · Answer

To follow up, I appreciate all the responses and I finally did end up getting a credit union to give my new lending company a checking account.  It wasn't easy, I had to provide a document detailing how my company would comply with "BSA/AML" (anti-money laundering) regulations, and answer a lot of questions on business purpose ... and interestingly these guys seemed to be very concerned that I was not involved in any way in marijuana industries.  I confirmed in writing that company policy was to not lend to any federally illegal industries, and went a step further to say we will not lend to any crypto or similar industry that could be evading US banking restrictions (and thus BSA/AML regulations).

In the end I was given a flat rejection by 3 major banks, 2 credit unions, and two online banks with no chance to explain my case before a credit union (who had told me no originally) saw the light.  I got varying answers for the rejection varying from "too many new regulations for us to comply with," to "your business is high risk," to "it competes with our lending business."  And my favorite was from Chase, "the computer tells us no lending business allowed so there's nothing we can do."

Andrew Postell · Answer

@Tim Daniels yeah, keep looking.  You will find a lender for this.  This is usually why we say to work with smaller, community based banks.  They are usually more flexible for us.

I might suggest to try and connect with other investors or lenders in your area.  It might sound weird but Facebook is a good tool in doing this.  You can try "Washington Real Estate Investors" or "Washington Loan Officers" to search for group pages (or some combination of those) and there will be thousands of locals in those groups who can suggest the banks they use.  I think that might be the best way to get this question in front of other people who are in your same shoes (or close to it).

Hope that makes sense.

Shafi Noss · Answer

I think just talk to more banks.

There are 4 banks in the same block near my house. I have a small lending fund and 2 of them denied me, one said yes and never responded, and I opened the account with the fourth which is a local bank.

Chris Seveney · Answer

@Tim Daniels

When I had an interest in a servicing company, we opened an account with PNC. They originally allowed it, but then required us to cancel it because they viewed us as a check, cashing business.

We run an eight figure mortgage note fund, where we buy and sell distressed, debt, as well as lending. We have an account with a local bank as well as with Chase. Never had issues opening up an account.

David C. · Answer

They don't want you competing with their lending/finance business.  I know, why do they care, you are small potatoes compared to them, but that's how they look at it.

Private lending LLC denied banking accounts - options?

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